Your Nonprofit Library Third Shelf – See What the IRS Demands of Your Tax Exempt Organization After it is Recognized as Tax Exempt

Here are the links for your nonprofit library to all the IRS forms, Publications and other material related to what you have to do after your organization is recognized by the IRS as tax exempt. Make a copy of all the publications and forms or mark them for easy access. Your local IRS office can secure copies for you without cost.

You will find here annual forms that must be filed, how to report contributions, issues over donations of motor vehicles, employment taxes, auctions, political lobbying, postal regulations and other resources. This completes the third shelf.

The single most change for reporting is the new Form 990. You should know this cold. Now!

Annual Filing to the IRS on Forms 990

Independent Sector’s article Revised Form 990, Accountability and Oversight - http://www.independentsector.org/programs/gr/draft_form_990.htm

Instructions for the New 2008 990s - http://www.irs.gov/irs/article/0,,id=186015,00.html

Forms 990 or 990-EZ and Schedules A and B – http://www.irs.gov/pub/irs-pdf/f990.pdf

990-EZ - http://www.irs.gov/pub/irs-pdf/f990ez.pdf

Instructions for Schedule A - http://www.irs.gov/instructions/i990sa/ch01.html

Instructions for Form 990 and Form 990-EZ (2007) –
http://www.irs.gov/instructions/i990-ez/index.html

e-Filing for Charities and Nonprofits, Form 990 (Return of Organization Exempt from Income Tax), Form 990-EZ (Short Return of Organization Exempt from Income Tax) and Form 990-PF (Return of Private Foundation) -
http://www.irs.gov/efile/article/0,,id=108211,00.html

E- Postcard Form 990-N New Annual Electronic Filing Requirement for Small Tax Exempt Organizations - http://www.irs.gov/charities/article/0,,id=169250,00.html

E-Postcard: Questions and Answers - http://www.irs.gov/charities/article/0,,id=173864,00.html

Pension Protection Act of 2006 Revises Exempt Organizations Tax Rules - http://www.irs.gov/charities/article/0,,id=161145,00.html

IRS Complaint Process For Tax Exempt Organizations - http://www.irs.gov/irs/article/0,,id=178241,00.html

Contributions from Taxpayers to Tax Exempt Organizations

IRS Publication 1771, Charitable Contributions - Substantiation and Disclosure Requirements – http://www.irs.gov/charities/article/0,,id=96102,00.html and http://www.irs.gov/pub/irs-pdf/p1771.pdf

Publication 526 is information for the taxpayer who makes charitable contributions - http://www.irs.gov/publications/p526/index.html

Motor Vehicles and Other Donations to a Tax Exempt Organization

New Publications Focus on Car Donations - http://www.irs.gov/newsroom/article/0,,id=124421,00.html

Form 4302, A Charity’s Guide to Motor Vehicle Donations –
http://www.irs.gov/pub/irs-tege/pub4302.pdf

Form 4303, A Donor’s Guide to Motor Vehicle Donations –
http://www.irs.gov/pub/irs-pdf/p4303.pdf

IRS Rules About Making a Motor Vehicle Donation - http://www.irs.gov/newsroom/article/0,,id=131660,00.html

Internal Revenue Bulletin 2007 – 40, Information Reporting by Organizations That Receive Charitable Contributions of Certain Motor Vehicles, Boats, and Airplanes - http://www.irs.gov/irb/2007-40_IRB/ar09.html

Exempt Organizations Abusive Tax Avoidance Transactions - http://www.irs.gov/charities/article/0,,id=128722,00.html

IRS Testimony: Charitable Giving Problems and Best Practices - http://www.irs.gov/newsroom/article/0,,id=124186,00.html

Independent Sector’s Comments about car donations - http://www.independentsector.org/programs/gr/vehicledonations.htm

Gaming

In addition to any state laws, see the material published by the IRS, Gaming Publication for Tax Exempt Organizations -

http://www.irs.gov/pub/irs-pdf/p3079.pdf

Topic 419 - Gambling Income and Expenses

http://www.irs.gov/taxtopics/tc419.html

Instructions for Form 990 and 990-EZ (2007)

http://www.irs.gov/instructions/i990-ez/ix01.html

Employment Taxes and Other Employer Instructions for Tax Exempt Organizations

Links to IRS articles concerning Employment Taxes for Exempt Organizations - http://www.irs.gov/charities/article/0,,id=128716,00.html

2008 Form 15, Circular E Employer's Tax Guide (revised annually) - http://www.irs.gov/pub/irs-pdf/p15.pdf

2008 Form 15–A Employer's Supplemental Tax Guide (revised annually) - http://www.irs.gov/pub/irs-pdf/p15a.pdf

2008 Form 15-B Employer's Supplemental Tax Guide on the employment tax treatment of fringe benefits - http://www.irs.gov/pub/irs-pdf/p15b.pdf

2008 Form 941 Employer’s Quarterly Federal Tax Return 941 Form (Rev. January 2008) - http://www.irs.gov/pub/irs-pdf/f941.pdf

2008 Instructions for Form 941 - http://www.irs.gov/pub/irs-pdf/i941.pdf

Publication 78, Cumulative List of Tax Exempt Organizations described in Section 170(c) of the Internal Revenue Code of 1986, a search for charities - http://www.irs.gov/charities/article/0,,id=96136,00.html

2008 Publication 509 (changes annually), Tax Calendars for 2008 - http://www.irs.gov/publications/p509/index.html

Publication 598 - Form to Declare Unrelated Business Income of a Tax Exempt Organization (NOTE: Tax Exempt organizations should be very aware of this Publication and its implications for Exempt status)- http://www.irs.gov/pub/irs-pdf/p598.pdf

Disclosure of Unrelated Business Income Tax Returns - The IRS has provided interim guidance (Notice 2007-45) on the requirement for 501(c)(3) organizations to make available for public inspection a copy of their unrelated business income tax (UBIT) returns (Form 990-T). The disclosure procedures are generally the same as those required for disclosure of an organization's Form 990. Some organizations not subject to other public disclosure requirements, such as churches, are required to disclose a Form 990-T; see Publication 598 immediately above - http://www.irs.gov/irb/2007-22_IRB/ar12.html

Intermediate Sanctions, Excise Tax on Excess Benefit Transactions (NOTE: Tax Exempt organizations should be very aware of this Publication and its implications for Exempt status. The purpose of this is to impose sanctions on the influential persons in charities and social welfare organizations who receive excessive economic benefits from the organization, rather than to punish the exempt organization itself.) - http://www.irs.gov/charities/charitable/article/0,,id=123298,00.html and http://www.irs.gov/pub/irs-tege/eotopice03.pdf

Political Activity and Lobbying

IRS Reminds Charities and Churches of Political Activity Ban - http://www.irs.gov/charities/charitable/article/0,,id=175825,00.html

Political Activities - Particularly important given the election season, the IRS released a revenue ruling (Rev. Rul. 2007-41) regarding what political activities are prohibited for tax-exempt organizations. To illustrate, the revenue ruling describes 21 situations and discusses which are permissible and which are not. http://www.irs.gov/irb/2007-25_IRB/ar09.html

Political Activities Compliance Initiative (2008 Election) http://www.irs.gov/charities/charitable/article/0,,id=181565,00.html

On February 3, 2009 the Chronicle of Philanthropy reported on an IRS vs Church-audit case involving alleged lobbying and candidate support. The article says in part:

Court Rules Against IRS in Church-Audit Case, By Grant Williams

The Internal Revenue Service has suffered another setback in its effort to pursue an audit of a church in Minnesota in a case that has ramifications for the tax agency and churches nationwide.
A U.S. District Court judge in Minneapolis ruled that the Living Word Christian Center, in Brooklyn Park, Minn., does not have to comply with an IRS summons for information because the summons was not authorized by a government official of sufficient rank.

The ruling by Judge Ann D. Montgomery concurs with a decision in December by U.S. Magistrate Judge Jeffrey J. Keyes.

Some tax-law experts have said that the IRS’s defeat could spur challenges to audits by other churches and force the IRS to engage in a lengthy, formal rule-making process to determine who has the authority to order an investigation into a church’s finances.

The IRS began to investigate Living Word in April 2007, following reports that the Rev. Mac Hammond had endorsed U.S. Rep. Michele Bachmann, a Minnesota Republican, from the pulpit—an act that would violate charity tax laws.

(Snip)

http://philanthropy.com/news/updates/7005/court-rules-against-irs-in-church-audit-case

Faith leaders and other nonprofit leaders may want to monitor this over the next several years. It could take that long.

IRS Miscellaneous Material

IRS Field Memoranda - http://www.irs.gov/charities/article/0,,id=96374,00.html

IRS Published Guidance and Bulletins - http://www.irs.gov/charities/content/0,,id=125361,00.html

IRS Revenue Rulings - http://www.taxlinks.com/rulings/findinglist/revrulmaster.htm and http://www.irs.gov/irm/part7/index.html

IRS Frequently Asked Questions (FAQ) - http://www.irs.gov/charities/content/0,,id=96986,00.html

ABC's for Exempt Organization
http://www.irs.gov/charities/article/0,,id=187787,00.html

United States Postal Service and Tax Exempt Organizations

United States Postal Service Publication 417, Nonprofit Standard Mail Eligibility; Explains and discusses eligibility for Nonprofit Standard Mail rates, application procedure, and mailing requirements - http://pe.usps.gov/text/pub417/welcome.htm and
http://pe.usps.gov/cpim/ftp/pubs/Pub417/Pub417.pdf

Other Resources

The Center for Non-profits of New Jersey has a booklet about Thinking of Forming a Non-Profit? What to Consider before You Begin: http://www.njnonprofits.org/ThinkingOfFormingDesc.html

See the Forming a Nonprofit Organization: A Checklist for incorporating at BoardSource, http://www.boardsource.org/Knowledge.asp?ID=3.367

Foundation Center Establishing a Nonprofit Organization - What are the characteristics that define an effective Nonprofit Organization? - http://foundationcenter.org/getstarted/tutorials/establish/

American Institute of Certified Public Accountants Understanding the Responsibilities of a Not-For-Profit Board Member [Download]
http://www.cpa2biz.com/AST/Main/CPA2BIZ_Primary/AuditAttest/AuditPreprationandPlanning/PRDOVR~PC-017248PPT/PC-017248PPT.jsp

American Institute of Certified Public Accountants How Fraud Hurts You and Your Organization http://www.cpa2biz.com/AST/Main/CPA2BIZ_Primary/FraudDetectionandPrevention/PRDOVR~PC-056513HS/PC-056513HS.jsp

American Institute of Certified Public Accountants The AICPA Audit Committee Toolkit: Not-for-Profit Organizations http://www.aicpa.org/Audcommctr/toolkitsnpo/homepage.htm

Six Things Every Board Member Should Know About the NEW 990 http://www.blueavocado.org/node/269

Planned Giving Design Center Tax Consideration in Charitable Auctions http://www.pgdc.com/pgdc/tax-considerations-charitable-auctions

Previous Related Blog Articles

Your Nonprofit Library Third Shelf – Getting the U.S. IRS to Recognize Your Nonprofit as Tax Exempt

The Role and Non-Role of Nonprofits and Churches in Elections – Your Nonprofit Library Third Shelf

IRS Makes Filing For Nonprofit Tax Exemption Easier, Sort Of

Effect of IRS Ruling Eliminating Advanced Rulings On Form 1023

IRS Rules on the Phase-in for Nonprofit Organizations to File the New 990 Series Forms

Fiscal Sponsorship or Agent: A Yellow Light

There are other articles here on incorporating a nonprofit. You are invited to add to this list.

Thank you.

Fiscal Sponsorship or Agent: A Yellow Light

There are two alternatives to incorporating as a nonprofit tax exempt organization in the U.S. It can depend on your mission and the activities you will perform as well as whether you will raise funds.

One very unique and successful group that has never incorporated and never raises funds and does not seek grants is Alcoholics Anonymous. If that is the model you are planning, really consider carefully why you think you need to incorporate.

The second example includes groups that have not completed their incorporation process and are raising funds and the group that will raise funds, work on its mission but does not want to incorporate and handle the records and necessary reporting and filing. Both of these alternatives can consider seeking a sponsoring partner, commonly called a fiscal sponsor or a fiscal agent. As you will see there is not unanimity whether it is a "sponsor" or an "agent". I will use the word "sponsor" for this article.

Very frequently individuals are required to have a fiscal sponsor for certain grants, folks such as artists, dancers, painters, film makers and so on. They can find the beginning of assistance from the funder or from articles at the Foundation Center, linked below.

This discussion is not about partnerships between nonprofit tax exempt organizations jointly seeking grants and one of them being the lead agent. Some aspects of what I am suggesting do apply, however.

I give the concept of finding a fiscal sponsor or becoming one a bright YELLOW light headed to red. I become annoyed when I see nonprofit leaders rather cavalierly tell inquirers, oh, just find a group to be your fiscal sponsor. Nor so fast cavaliers.

There are several items I suggest:

1. Both groups should perform due diligence, that is, investigate the other for fiscal, legal and other problems, wrongdoing or misconduct
2. Have the fiscal sponsorship in writing detailing the duties and obligations of both parties. It will be a legal document
3. Be a sponsor only of groups that share a common or similar mission as stated in your incorporating papers and the IRS filing of the 1024
4. Consider only sponsoring groups that are in the process of incorporating and filing for tax exemption
5. Have an ending date or ending event in the agreement
6. Have the respective boards review and agree to the contract and have an approved person sign and date it.

Both the sponsor and the group need to recognize that the sponsor CONTROLS the following items:

1. Sponsor may charge fees up to 15-20% of the revenue or expenditures
2. Donations and grants are payable to the sponsoring organization
3. The sponsor provides the IRS documentation of tax exemption for donations for the group
4. The sponsor maintains the bank account and all receipts for the group
5. The sponsor pays all bills based on required fiscal reports and receipts filed by the group
6. The sponsor receives requisite reports in a timely fashion from the group including for the sponsor to file grant reports and the IRS 990
7. The sponsor hires any staff and maintains salaries and benefits
8. The sponsor may provide other services to the organization by contract such as offices and human resources,
9. The sponsor provides the insurance
10. The sponsor can be responsible for debts incurred by the organization
11. And more as agreed by the parties

As fiscal sponsor, is that what you want to do?

As the group seeking assistance, is that what you are prepared to sign up for?

Resource material:

From the Adler and Colvin law firm:

Fiscal Sponsorship Agreement (Model A)

Fiscal Sponsorship Grant Agreement (Model C), short form

Request for Technical Advice (IRS Lobbying Exception) - Effect of fiscal sponsorship on lobbying
http://www.fiscalsponsorship.com/images/WCTEO_Gregory-Colvin.pdf

A handy-dandy chart COMPARISON OF STARTING A NEW 501(C)(3) ORGANIZATION WITH USING A FISCAL SPONSOR (MODEL A) by Gregory L. Colvin 4/30/08
http://www.fiscalsponsorship.com/Compare%20501c3%20w%20Fisc%20Spon%20Model%20A%20_00075865-2_.pdf

The U.S. Bureau of Justice has material about how they handle fiscal agency; they do not call it “sponsorship”.

BJA will award a single grant based on an approved application in each of the U.S. Attorney Districts. However, the selection committee may wish to dedicate funds to more than one jurisdiction or for more than one project. As a result, each task force will need to use a fiscal agent to receive the funds and then make subawards to or enter into contracts with each project or entity that will carry out each component of the strategy. Only nonprofit organizations and units of state and local government are eligible to apply to be the fiscal agent.

The BJA also has the following Tool Box to help solidify what they are looking for.

Tool Box

List of BJA's State Administering Agencies (PDF)

U.S. Attorney Certification Process for the Fiscal Agent and Subrecipients

Sample Certification Letter for Fiscal Agents

http://www.ojp.usdoj.gov/BJA/psngrants/psn4.html

The San Francisco Study Center, which rejects the words "fiscal agent" as inappropriate, requires the following at a minimum to provide fiscal sponsorship. Study Center offers its sponsored projects:

1. Budget development and tracking
2. Tracking and payment of vendor invoices
3. Personnel administration including payroll and benefits administration
4. Maintenance of individualized general ledgers for each project
5. Contract management, including invoicing and reporting to funders
6. Individualized monthly statements
7. Management of organizational insurance requirements

http://www.studycenter.org/test/services.html#fiscal

The Foundation Center's article, What to Consider Before Becoming a Fiscal Agent, is a brief look at the topic - http://literature.foundationcenter.org/2008/12/what-to-consider-before-becoming-a-fiscal-sponsor.html

Good information for individuals at the Foundation Center, What is a fiscal sponsor and how do I find one? http://foundationcenter.org/getstarted/faqs/html/fiscal_agent.html

The Foundation Center also has material about Where can I find examples of policies, procedures and guidelines for fiscal sponsorship agreements on the web?

http://foundationcenter.org/getstarted/faqs/html/fiscal_example.html

The Community Resource Center, Colorado features a discussion about sponsorship by David Barlow, CPA:
http://www.crcamerica.org/nonprofit_formation/sponsor.asp

Community Technical Assistance Center, Fiscal Sponsorship

http://www.ctaconline.org/fiscal.asp

I strongly suggest the parties discuss this option with their own lawyers during the yellow light.

I am required to tell you that I am a licensed attorney in New Jersey. I may have given you legal information here but I have not given you legal advice.